The year 2005 will be considered as 'one of the best' from investors point of view as almost all the sectors of the economy enjoyed strong support from retail investors, foreign financial institutions, mutual funds and other domestic financial institutions. The BSE Sensex of 30 leading scrips zoomed to its historical high, touching the level at 9309 on December 14, 2005. The overall improvement in industrial output, higher than expected monsoon, higher agricultural production, better show on export front and higher estimates of GDP growth aided the overall sentiment in the markets.
In line with this, the pharmaceutical segment also received all-round buying support and the BSE Health Care (BSEHC) index of 27 major pharma companies touched to its 52-weeks peak level at 3177.52 on December 14, 2005 as against its lowest of 2401.25 on April 28, 2005. However, there was small correction due to profit taking and the BSEHC index closed at 3086 on December 15. Overall, there were smart gains by majority of pharma scrips during 2005 and the same trend is likely to continue with FIIs support and positive developments in new year also.
The market capitalization of 75 pharmaceutical companies touched to Rs 1,28,038 crore on December 15, 2005. Majority pharma scrips were hovering to their 52 weeks' highest level. Ranbaxy split its shares from Rs 10 face value to Rs 5 each recently and remained at top in terms of market capitalization of Rs 14,425 crore on December 15, 2005, before the US court verdict. The adverse court decision in UK and US in respect of Pfizer's patented product and set back in working for the first nine months of 2005 put pressure on scrip movements. Sun Pharma's market capitalization touched to Rs 13,051 crore and that of Cipla's moved up to Rs 12,919 crore with better financial figures for the first half of 2005-06. Out of 75 companies that PHARMABIZ selected for its sample survey, 28 companies recorded market capitalization of more than Rs 1000 crore.
The Indian pharma scrips received a boost during the second half of 2005 on account of the announcement of strong fundamentals, efforts towards enhancing presence in regulated market, introduction of cost effective new generics, healthy product pipeline through own R&D activities, filing of increasing numbers of DMFs and ANDAs, growing mergers & acquisitions activity, increasing tie-ups for contract manufacturing and research, aggressive marketing by setting up foreign subsidiaries, expansion of manufacturing base, availability of talent pool as well as scientific base and investor-friendly behaviour. The pharma scrips enjoyed investors' confidence and got necessary buying support.
Initially at the beginning of 2005, the Indian pharma segment suffered due to uncertainty about the implementation of MRP based excise duty and commencement of Value Added Tax (VAT). The adoption of patent regime also brought fear and impacted the investors' sentiment on a large scale. The last quarter of fiscal 2004-05 (January 2005- March 2005) put pressure on every pharma player in the country due to change in government policy regarding excise and VAT. The sales and net profit of top 50 pharma companies of PHARMABIZ sample increased only by 7.4 per cent and 4.9 per cent respectively, with leading companies under tremendous pressure.
On the international front, leading companies experienced stiff competition and significant higher marketing costs. This put pressure on exports earnings. Export earnings of leading 25 pharma companies increased only by 7.7 per cent in 2004-05 to Rs 9567 crore. The BSEHC was hovering around 2428 as at the end of April 2005.
However, the pharmaceutical segment has overcome the problems successfully and strengthened its top line as well as bottom line in the first quarter and second quarter of 2005-06. The net sales of 50 leading pharma companies increased by 19.9 per cent to Rs 12,011 crore and their net profit moved up strongly by 32.4 per cent to Rs 1735 crore. This financial performance has offered sufficient support to pharma players and BSEHC started moving upward from May 2005. Within one month, the index saw a growth of over 283 points and maintained the similar pattern to reach at 3086.09 at the close of December 15, 2005.
The analysts expressed positive signals and said that the mid-cap pharma companies are doing well and moving fast than the major companies with sales turnover of Rs 1000-crore or above. The long term outlook is better for pharma on account of healthy product pipeline and rising contract manufacturing activity. About lost of legal battles, the analyst pointed out that the over the years, the Indian companies will have to change their strategy of confrontation and try to go along with MNCs and respect innovators.
The pharma companies are paying their investors handsomely by way of bonus or dividend. Torrent Pharma recently announced bonus shares in the ratio of 1:1 Earlier, Wockhardt, Sun Pharma, Glenmark, FDC, IPCA, Alembic, Zandu and Matrix issued liberal bonus shares to their shareholders. Several pharma companies also declared more than 100 per cent equity dividend. During the last year, several pharma companies split the face value of shares, which also pushed the liquidity and trades in the markets. The relatively new companies on the capital market like Dishman, Biocon, Divi's Laboratories, Matrix Laboratories Indoco Remedies also performed well on stock market.
As the sentiment rose strongly in favour, several new pharma companies entered the capital market during 2005. Nectar Lifescience Ltd, Vivimed Labs Ltd and Mangalam Drugs entered the capital market during the year. Indoco Remedies entered capital market during December 2004 with a public issue of 30 lakh shares with having a price tag of Rs 245 per share. All the issues received very good response from the investors and were oversubscribed.
The Indian pharma companies have been successful in creating their brand image in the regulated markets. Several companies issued FCCBs to part finance their expansion and acquisition plans. With strong financials, the FCCB issues received overwhelming support from foreign investors.
The pharma scrips enjoyed investors' confidence and got necessary buying support. Initially at the beginning of 2005, the Indian pharma segment suffered due to uncertainty about the implementation of MRP based excise duty and commencement of Value Added Tax (VAT). The adoption of patent regime also brought fear and impacted the investors' sentiment on a large scale. The last quarter of fiscal 2004-05 (January 2005- March 2005) put pressure on every pharma player in the country due to change in government policy regarding excise and VAT. The sales and net profit of top 50 pharma companies of PHARMABIZ sample increased only by 7.4 per cent and 4.9 per cent respectively, with leading companies under tremendous pressure.
On the international front, leading companies experienced stiff competition and significant higher marketing costs. This put pressure on exports earnings. Export earnings of leading 25 pharma companies increased only by 7.7 per cent in 2004-05 to Rs 9567 crore. The BSEHC was hovering around 2428 as at the end of April 2005.
However, the pharmaceutical segment has overcome the problems successfully and strengthened its top line as well as bottom line in the first quarter and second quarter of 2005-06. The net sales of 50 leading pharma companies increased by 19.9 per cent to Rs 12,011 crore and their net profit moved up strongly by 32.4 per cent to Rs 1735 crore. This financial performance has offered sufficient support to pharma players and BSEHC started moving upward from May 2005. Within one month, the index saw a growth of over 283 points and maintained the similar pattern to reach at 3086.09 at the close of December 15, 2005.
The analysts expressed positive signals and said that the mid-cap pharma companies are doing well and moving fast than the major companies with sales turnover of Rs 1000-crore or above. The long term outlook is better for pharma on account of healthy product pipeline and rising contract manufacturing activity. About lost of legal battles, the analyst pointed out that the over the years, the Indian companies will have to change their strategy of confrontation and try to go along with MNCs and respect innovators.
The pharma companies are paying their investors handsomely by way of bonus or dividend. Torrent Pharma recently announced bonus shares in the ratio of 1:1 Earlier, Wockhardt, Sun Pharma, Glenmark, FDC, IPCA, Alembic, Zandu and Matrix issued liberal bonus shares to their shareholders. Several pharma companies also declared more than 100 per cent equity dividend. During the last year, several pharma companies split the face value of shares, which also pushed the liquidity and trades in the markets. The relatively new companies on the capital market like Dishman, Biocon, Divi's Laboratories, Matrix Laboratories Indoco Remedies also performed well on stock market.
As the sentiment rose strongly in favour, several new pharma companies entered the capital market during 2005. Nectar Lifescience Ltd, Vivimed Labs Ltd and Mangalam Drugs entered the capital market during the year. Indoco Remedies entered capital market during December 2004 with a public issue of 30 lakh shares with having a price tag of Rs 245 per share. All the issues received very good response from the investors and were oversubscribed.
The Indian pharma companies have been successful in creating their brand image in the regulated markets. Several companies issued FCCBs to part finance their expansion and acquisition plans. With strong financials, the FCCB issues received overwhelming support from foreign investors.
Click here to view Market capitalization of 75 Leading Pharma Cos: December 15, 2005